tv Closing Bell With Maria Bartiromo CNBC December 28, 2012 4:00pm-5:00pm EST
yourself by buying volatility at this point, right? buying vix. >> it's been a very good trade. can you buy the vix at 18.25 on monday into that tape so it's been a pretty expensive insurance policy. >> do you buy gold? do you buy bonds? is there anything else out there? i can't imagine an individual out there buying the vix, for example. that's a very sophisticated trick. >> you can buy puts on the major indices, puts on the dows or puts on the spiders. i don't know anything about gold. if i'm forced into a hard asset, would i rather look at silver, but in bonds, i think the risk in bonds is extraordinary, but i'm not a bond guy, so it's a little prejudice, but that's a dangerous play to me. >> see you later. all right. here we go. we're going into the last hour here as we wrap up the trading week near the lows of the day and of the week, down 142 points. stick around. we may hear something out of this white house meeting during this second hour of the "closing bell" which gets under way right
now. and welcome back, everybody, to the "closing bell." i'm mandy drew i sitting in for maria bartiromo. lots of drama in washington. congressional leaders have arrived at white house. they arrived there about an hour ago with three days to go before we go over that proverbial fiscal cliff. they are meeting with the president and the treasury secretary timothy geithner, and they are trying to hash out a deal. but reports that the president has nothing new on the table has ended up spooking wall street in a big way just in the last hour, and as bill said we finished down near the lows of the day, down about 157 points for the dow. settling up right now. down what, about 165 at the very low, bill? >> i think so, yes. >> and the nasdaq finishing down 25 points and the s&p off by 15, a fifth straight day in the red. well, it is the last friday of 2012. it's in the books. check. still no deal in sight and no new offer either on the table from the president as eamon javers told us a little while ago. what now for the markets?
we have our guests and our very own rick sell sebak with us. rick, let me get to you, first of all, because you're here on the set. what now for the markets? >> what now for the markets? it's going to be up or down dramatically which makes it challenging for all investors. are we going to have resolutions? are we headed over the cliff to give pain to the shorts in the investors have to find a smooth ride through? >> how? >> a great new tool called liquid alternatives that brings strategies to the public through mutual funds. you can combine longs and shorts to take advantage of this type of volatility, and find ways hopefully to smooth the turns moving into an uncertain future. >> could sure use that right now. quinn tetreault, here we go again. another headline-driven day,ed a the markets, you know, minute by minute, can turn on a dime here. >> you know, bill, this is what i don't understand, and i
appreciate the previous guest's, you know, solution, but what is wrong with cash? there's a phrase that i live by and that is opportunity cost is easier than made up in losses. i've said this since thanksgiving to go long this tape until the end of the year. you're betting on congress which is absurd. why would you bet on congress? i don't care if they convene sunday night at 6:00. you going to bring the senate back at 2:00 a.m. to reject their bill. there has been no market pressure on this congress, and until there is, there will be no deal which means we go a lot lower before they ever come across the aisle to make a deal and solve this issue. >> but we don't know exactly what is going to happen in the new year, right, and isn't it a big risk? if you go into cash now, liquidate, go into cash and there's a big real, and we're off to the races again? >> you know, that -- again, that is -- i have a very hard time with the got to be in all the
time to miss a rally opportunity. look, odds are there's going to be volatility, and we even saw it this year. the market ends, you know, a nice strong year, but there was opportunity to buy weakness during the year, so if -- look, if miraculously they come out and there's a huge deal and you are cash heavy, as i am, will i be, you know, clamoring to put that money to work to try to chase the run? absolutely not. >> okay. >> odds are there's no deal and with that there comes a selloff, and then there's your opportunity, on panic, not on frenzy. >> david, you have to admit the expectations are more modest as we go into the weekend here. what do you think is coming, and how are you positioning yourself ahead of that? >> i think quite frankly cash is not the right solution. we can still count on government to disappoint us each and every time that we need their support, that's a beginning, yet we've
had two 10% corrections already this year in stocks, including dividends. they are up close to 14%, and this type of environment, where you're probably going to see another 3% to 5% selloff because of this fiscal announce, fiscal irritation, and when you get that, you should take that money and put it to work. simply because when you look at corporate america, the average company, bill, is generating a 16% to 17% return on equity, record free cash margins and a federal reserve that has the pedal to the metal. what you and i have talked about before repeatedly, $4 in taxes for every dollar in phantom spending cuts. that's fiscal irritation, but the health of corporate america will be what ultimately prevails. >> sounds like david has been reading your book, rick santelli. >> it does. >> big fan of rick.
>> this is such a perverse world we live in, okay. let's look as what's happening. down 158 in stocks and that pushed the ten-year yield under 170, okay. >> really. let me get this straight. they can't get a deal on controlling out-of-control debt, so rates go down. i used to trade during graham/rudman and i remember when they couldn't get deficit conversations right, treasuries went down and stocks went down. oh, would i love to get back to that type of reality. >> yeah. but you had a different guy at the federal reserve at the time. >> yeah, a different guy, you know, in hindsight he was maybe the monetizer in charge -- in chief, and we get a little historical perspective on that, but as many things that i disagree with alan greenspan on, i thought he was at least more forthright into what he was doing, and even going after the government per se a bit when there were tax issues, all av d avoided by the current chairman
ben bernanke, and even though he avoids the conversation, he doesn't avoid giving congress the biggest fire hose in the world filled with free water. >> i love those kind of fire hoses on every corner, please. >> what's that, david? >> bernanke is the most aggressive fed governor we will ever know in the last 40 or 50 years with the monetary stimulation that began in november 2008. >> well her, needed to be? >> and that's likely to still be the only game in town in the face of just fiscal irresponsibility. >> in light of a digs functional congress and no fiscal direction coming from washington in terms of the capitol or the white house, you needed a more aggressive fed chairman, didn't you, david? >> absolutely, you do, and he's the best student of history for this type of situation. i worry two or three years down the road when he has to unwind it, when this record monetary stimulation could ultimately be inflationary, but that's not anywhere in the cards for the next 12 to 18 months.
>> he won't be there anyway. he doesn't have to worry about that. he won't be there to unwind it. >> oh, he might be. he could still well be there. >> thank you, guys, very much. happy new year if we don't see you later. appreciate it. >> our old hopes of rising above just a lost cause at this stage. grover norquist, the president for americans for tax reform is coming on the show next because almost every republican member of congress has signed his pledge not to raise taxes. we'll get his take at what is i would say a very critical juncture. >> and also estate taxes scheduled to jump from 15% to 35% with montana land values more than doubling in past decades. farmers and ranchers are up in arms because the impact estate tax would have on their ability to hang on to their land. we'll speak with one of them coming up in the next half hour. >> also weighing in is outgoing montana governor brian schitser who was a farmer and rancher
himself so he should know a thing or two about that. >> plus, health care sunday the microscope right now. we'll find out if this year's winners can carry their mojo into next year. you're watching cnbc, first in business worldwide. again? it's embarrassing it's embarrassing! we can see you carl. we can totally see you. come on you're better than this...all that prowling around. yeah, you're the king of the jungle. have you thought about going vegan carl? hahaha!! you know folks who save hundreds of dollars by switching to geico sure are happy. how happy are they jimmy? happier than antelope with night-vision goggles. nice! get happy. get geico. fifteen minutes could save you fifteen percent or more. we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morn 24 hours. zero heartburn.
the big leadership meeting at the white house is now in its second hour though it has become clear that the president will not be putting any new proposals on the table. our eamon javers broke that report for us, and i believe we'll continue to monitor the developments there behind you. what do we know from when we last spoke to you? >> reporter: well, what we know now, mandy, this meeting has not broken up yet. waiting to see any signs of congressional leaders coming out of the building over here to my left, but what we do know as well from a source familiar with the meeting that the president was planning going into the meeting not going to make any offer at all saying he stands by his offer offence tenting the bush tax cuts for those making less than $250,000 a year. he was planning on asking the republicans if they had a counterproposal that could pass the house or the senate, and if they did not, he was going to ask them for a straight up or down vote in congress on his proposal at this point. now we'll wait to hear from the
republicans when they come out of this meeting how they responded to the president here. a lot of high drama late this afternoon in washington. >> you're not getting any guidance about them coming out to talk to you guys afterwards, are you? >> reporter: we are not, but just over here the stakeout position where reporters wait to see whether or not the principals will come out and talk in front of cameras, there is a crowd of about 50 or 75 reporters there now waiting to see if anybody comes out. it's one of the bigger stakeout crowds i've seen of reporters waiting for a breakup of a meeting in the time i've been covering the white house. >> was that a live shot we were just showing, guys? >> there's john kerry, too, so the presumed -- the designate for secretary of state is standing by as well outside the white house. >> i have been told by other reporters, i did not see kerry myself, but i'm told he's here in the complex. we don't know why he is here. my guess, is just a guess, that it has nothing to do with the fiscal cliff, it has something to do with the secretary of state's job. >> you would think so. >> reporter: but we don't know.
>> eamon, thank you. more developments as they become available to us, and while the leaders in washington do try to tackle the fiscal cliff, at least the democratic leader in the senate has no problem placing the blame on one particular person when it comes to not getting anything done. senate majority leader harry reid had this to say on the senate floor yesterday. >> months and months of talks between the president and boehner, both times boehner could not deliver because they refuse because of grover norquist to allow any tax revenues whatsoever. they cannot cross over the threshold that has been built by grover norquist. >> grover norquist joins us now exclusively here on cnbc. grover, we just heard you are the target of those comments, but did harry reid get it wrong, because i thought that your organization actually gave its blessing to boehner's plan "b." >> reid has it wrong on a number of levels. the first, of course, is that the pledge that many congressmen and senators have made to oppose tax increases is made to the
people of their state, not to me. in fact, harry reid now has the republican senator joining him from nevada who won because he made that commitment. he took the pledge, and the democrat that harry reid supported attacked him for taking the pledge, and the people of nevada said we want a senator who will stand with us against harry reid's tax increases, so -- and, of course, the issue that came up with plan "b" which was mr. boehner's recommendation that we pass something out of the house which would stop all the tax increases on anyone who earned less than $1 million permanently, was something that didn't violate the pledge, and we said so and endorsed the message. >> why did thn't that violate t pledge? it raises taxes. >> there's an automatic tax increase coming up. what it does is says permanently.
most of the people who would be hit by that tax increase will never be hit by it. there's one of the challenges that you have is obama, when he ran for office four years ago, said he'd never raise taxes on anyone who made less than $200,000, married people less than $250,000, but the new pledge made in 2012 said that his plan, this was august 8th, and since then, obama says my plan is that if you make less than $200,000 you'll see no income tax increase next year, so obama's new commitment is only the income tax, only for one year. >> right. >> and, of course, we're all paying higher taxes in january because of obama care. >> okay. >> taxes on capital gains. >> let me ask you this though, grover. i can imagine you wear it as a badge of honor to this the senate majority leader on the floor of the senate invoking your name in frustration because there are people on the republican side who are, you
know, following your -- your lead to not raise taxes, but let's face it. you were in -- you were imposing this no higher tax in a different era, at a different time, in a different part of the economic cycle. aren't we at a point now economically where there has to be some mechanism of revenue raising to try and solve the debt crisis? yes, i know you're going to talk about spending cuts. that's important as well, but you've got to balance the budget in some way, and it's got to include some form of a tax increase, not just on million dollar earners, agreed? >> no. you have it exactly wrong. if you put tax increases on the table, you never get spending all obama's done for the last four years is clamor for higher taxes to spend more money. the only time we've ever beat him back on spending at all was during the debt ceiling crisis where republicans said we're not giving any tax increases. we have to have $2.5 billion in
spending cuts. then you can have your debt ceiling. they won that fight. in '82 reagan put taxes on the table. spending cuts never happened. '90, bush put tax increases on the table, spending cuts never happened. obama never even put spending cuts on the table. he's putting spending increases on the table for another round of solyndra stimulus spending. he was willing to save money, $1 trillion, but not occupying iraq for the next decade. they kicked him out of the country a little while ago, but he wanted to count that like not continuing the war of 1812 as his budget cut. >> don't you feel though we're at such a fiscal crisis situation that there needs to be compromise on both sides though? there has to be some give to get something done? >> oh, absolutely. look, the republicans passed the ryan plan which saves $6 trillion over the next decade. reforms entitlements.
reforms taxes. what we need is some spending restrai restraint. maybe we don't get all $6 trillion that the republicans were tough enough and strong enough and brave enough and courageous enough and serious enough to pass a budget. you talked about harry reid picking on me. harry reid suggesting that i'm the reason they haven't done anything is a little bit silly. he ought to look in the mirror, and the reason for that is the senate hasn't voted a budget in three to four years. it would be nice if the senate would pass a budget. then we could compare it to the republican budget, and perhaps we could compromise on how much spending we need to bring down. >> right. >> but raising taxes is not a compromise because the problem is spending. you can compromise on how much you cut spending. >> right. let me ask you this. we're running out of time as we always do. never enough time with grover norquist. how about this proposal from coaching and alexander today that would raise the debt ceiling by $1 trillion if you had a commensurate amount of money taken out of the medicare
system by raising the age eligibility to 67 and means t t testing for wealthy recipients of medicare? does that work for you? >> well, if it's all on the spending side, remember, when we get past this fiscal cliff, boehner and mitch mcconnell have made it clear the president wants a debt ceiling increase of any amount, like $1 trillion, he has to find $1 trillion in savings. >> well, according to corker and alexander, this is $1 trillion in savings from the medicare program if you do what they are suggesting here. >> all from spending, i hope? >> that's what they are saying. >> if it's all from spending, that's something we could do as part of the debt ceiling. that -- that's a fine suggestion. it -- it just shouldn't be confused with the present mess this week. >> but, they are adding this to the conversation if -- i mean, obviously we're not going to get something comprehensive before december 31, but as the talks
continue, assuming they do into january, maybe even longer as we get closer to the debt ceiling, is this a kind of a compromise that you can accept on the other side? >> yes. it is very clear that boehner and mitch mcconnell have made clear, if the president wants a dollar of debt ceiling increase, we need to cut spending a dollar, and that goes for $1 trillion because the president is going to want a trillion dollar debt ceiling increase because of the debt he's running up. that kind of spending restraint is exactly the kind of thing we need to do in the future for any debt ceiling increase period. >> okay. and as you see there, bob corker will join "the squawk pox" gang on monday morning. grover, always good to see you, thank you. >> thank you very much. >> president obama, congressional leaders meeting at the white house to avoid the fiscal cliff. we'll bring you the latest developments on that any minute now. >> also, we'll check up on health care, one of the year's best performing sectors. we'll find out if it's going to run out of steam in the new year
and name some names for you coming up. >> and later on, big sky, big jump in estate taxes if congress fails to reach a deal on the cliff. we'll talk to a montana rancher who is pretty upset. coming up, montana's governor brian schweitzer is going to weigh in. >> looks like the meeting may have broken up. there goes nancy pelosi, and we are told now house speaker boehner may have already left, and, no, they are not talking to reporters. nancy is looking for her car to leave the white house, and we're not getting anybody talking to the reporters at this point, so maybe we'll get some -- and i'm told now the futures market in the after-hours pegs is extending the losses that we've been seeing in the last hour of trade. maybe we'll get eamon javers to get in front of the camera when we come back. stay tuned. [ male announcer ] at scottrade,
where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade. congressional leaders have just left the white house about an hour and 20 minutes arriving for a meeting with the president and also the treasury sent. let's get straight back out to eamon javers. eamon, have they said anything as they left? >> reporter: no, mandy. both speaker boehner and democratic leader nancy pelosi headed straight for their cars, leaving the white house west wing here without talking to reporters. there's a very disappointed crowd of reporters here who were hoping for some comment from them. we have not yet seen, however, the senate leaders departing from the white house. it appears they are a few minutes behind the house
counterparts who have already left at this point, so we're waiting to see if any of those folks will come over and talk to us at the camera position. it looks like that meeting is just about over an hour here at the white house, and we'll try to find out exactly what happened behind the closed doors >> you know, speaker boehner has made it clear the ball is in the senate's court at this point. he said we have done what we need to do. the senate needs to do something. can you imagine that's why they are staying, that they are taking that to heart. >> reporter: that's a fairly good bit of speculation. i'm getting a little over my skis here guessing at what's going on. anything that has to start will have to start in the senate at this point because of exactly what you just said and boehner's comments earlier in the week, so we would expect maybe they could huddle up and come up with something that could move in the senate and go to the house. whether or not they nailed down the votes for all of that in this meeting today will be the big question. >> obviously there's the reconvening of the house on sunday evening, 6:30 p.m., and if nothing is achieved today, no
bone that they can toss to them, what happens then on sunday evening? >> as time goes on, no news, you get a smaller and smaller package here, don't you think so? >> reporter: that's absolutely right and what's happening with the sunday 6:00 p.m. vote, they are told, the house members, that is, told to be back here in washington and ready to vote by that time. what they are not told is what they will be voting on, if anything, by then. a lot of folks said that's a way of getting the house members back here sunday night to be ready for something possibly on monday, but we don't know. it's basically a place holder in the schedule waiting to see if something can come over to them from the senate side and maybe that's what they are hashing out right now. simply don't know at this very minute. we'll try to found out. >> i think in an hour's time at 5:30 was going to be a meeting with the business leaders. >> reporter: white house senior staff is going to conduct what i'm being told is a routine conference call with business leaders to brief them on fiscal cliff developments. i'm told that the president himself will not be on that
conference call, but that the ceos will get the latest on what's going on with the fiscal cliff, and you can imagine that that is part of an overall effort here by the white house to sort of win hearts and minds in the business community. they really, really want the business community out there on their side pushing capitol hill to get a deal done, so that's what that meeting is going to be all about at 5:30 >> i hope somebody has a cup of hot tea for you there, my friend. rest your voice. >> reporter: will do. >> i know you'll be with us a little further down the road. meantime, as all of this is developing and the meeting in the white house has broken up, the futures markets, and admittedly they are going to be very thinly traded right now, but they continue to move sharply lower, down another 1.7% from the close, now we're at the 12,770 level on the dow jones futures right now. >> that's the march contract. >> so this is not the cash, but we are moving lower there, and i -- somebody was telling me the vix, the fear indicator, in the
after hours has now moved even higher. it closed at 22 and change, the highest since june, and it's even moving higher from there, so the markets are con to respond, those markets that are still trading to the developments or the lack thereof coming out of washington. we'll come back. we've got more of the teetering as we get closer to the cliff. it's all hanging in the balance here. should you be buying or selling right now? two wall street money pros will tell you what they feel they should do coming up next. >> coming up, laut losing the farm on the ranch. what will happen to millions of farmers and ranchers across the country if congress does not get its act together. >> and also -- this is $100,000. we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger,
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well, we have just wrapped up the worst five-day run for the three major averages in six weeks on perceived lack of action and lack of progress from the white house. let's get back to eamon javers who is in front of the white house, and i believe you have a little bit more information us about the fiscal cliff meeting that just broke up between the president and congressional leaders and that there were some disappointed reporters, yourself included, that they didn't speak to you. >> reporter: that's right, mabdy. we always want that exclusive
interview or even a non-exclusive interview, but a little bit more information here. the white house is telling -- the white house press pool was told the meeting ended at 4:15 p.m. so that puts the meeting at just over an hour all told, and i'm told that we just saw senator mcconnell, the republican leader in the senate leaving the white house here, so that gives us three out of the four congressional leaders that we've now seen going out of building. unless i'm missing senator reid here. it looks like he might still be in the building at this point. >> the republicans have left the building pretty much. >> reporter: that's right. >> leaving the democrats to talk about this. so it doesn't look that great. stay right there. let's talk about this with some market pros, morgan lander and stephen nicholas is with us, ed moy and rick lake was with us earlier. chad morgan lander, what do you do? investors are watching all of this, they want some direction and they want to get ready for 2030 and the nonsense continues in washington. >> well, the market is going to
get sloppy over the next two weeks until they get a resolution, and you should fully expect that they will get a resolution, and it will be just a short-term resolution. once you get, that the market will then snap back, so we're expecting between a 5% and 7% correction within the market until that time comes, but do you want to layer in risk. you want to be buying good quality companies at this point in time as the market comes into, because that market will snap back, and you will see a modicum of economic growth going further out into the spring. >> and i can see that apple is one of the ones that you like there in terms of snapping up beaten down stocks. you see 20% upside. ed, i want to get to you because i was reading through your bio and you worked at the white house for almost six years, experience with the treasury department and also a former u.s. mint director. do you have any -- any feeling, any sort of inside feeling, if you like, about what's going on over there? >> yeah, you know, i've been
there before, and can i say that all the parties truly wanted to come to some type of resolution, but they have kicked the can down the road so many times it's all the solutions that are left are extremely difficult ones with huge political and economic negative consequences, so from my perspective they are having so much difficulty trying to come to agreement. i'm shaving a little bit off of this year's deficit. we're going to have fiscal problems for as far as the eye can see, an here's where an investor, a smart investor is going to want to diversify, especially into things like tangible assets like gold. >> you're going to make the case for gold here, which, you know, has had a heck of a run for the last decade or so, but it has started to show signs of wear and tear. what would propel gold from here necessarily? >> well, two things that i would have your viewers take a look at. the first is the reason why gold has kind of flattened out at about 1650 or so is because a
huge amount of supply has come on the market. there's a lot of profit-takers who are worried about increased taxes next year. as you said, they have made a lot of money on gold, so they are selling it right now and locking in those profits. the other thing to look at that very few investors have caught on to but when i was at the mint we studied this, gold demand and gold prices correlate very well with the national debt ceiling. national debt ceiling is 16.5 trillion. gold has stabilized at roughly 1650, 1660. once that debt ceiling is raised, and it will have to go up or the government will default. >> right. >> once that gets raised, gold will raise with it. i think it will go up to 1,800, 1,850. >> gold is one of those alternative investments that people often look at. do you like gold, too? >> we have a great preference for long and short strategies. since the market has gotten so choppy, there are winners and losers on both sides of any given asset class, sensible long
short manager can find opportunity in both and put them together and you'll see the ride. >> reporter: eamon, you know, you and i talked earlier, and i'm going to get back to this meeting that apparently has broken up now without any developments at least publicly speaking. when you have such a high-profile meeting it's more politically motivated than it is to try to bring any substance to the table here. do you sense that's what happened here in the last hour? what is everybody talking about over there? >> one of the big questions here is whether or not the white house and the congressional leaders let expectations run a little rampant this afternoon ahead of the meeting. a lot of attention on this. just about the only thing going on in washington here today. if the white house knew that the president was not going to, making a new offer here today, a lot of the speculation that was going on early and mid-afternoon might have not been healthy necessary for the deal-making dynamic here, because a lot of people were speculating that in fact there was a deal, a mini proposal, something coming new from the president, and then we get to the meeting and find out, in fact, no new offer from the
president, reiterating what he said last week on friday, so the speculation got well ahead of events here, and that sort of lends to an air of disappointment here in washington and up there on wall street. we still don't know what exactly happened in this meeting so we're waiting to find out. >> obviously the fiscal cliff is the crisis du jour, chad, were you saying you would prefer to use dips as opportunities. where do you think we will be 12 months from now? no doubt there will be another crisis that we're talking about in 12 months time. what it is we do not know yet. >> you know, this is going to be a great buying opportunity. we're expecting the s&p to hit around 15, 25, 15.50, modest earnings growth. now, there are companies that you should be looking at right now, for instance, apple. you could say 20% upside in the next 52 weeks on apple. walmart, very good quality company. also oracle.
all these companies are growing profitable and well capitalized, and as the market comes into us, we should be layering on risk. >> all right, folks. thank you. eamon, you're not done yet. get a cough drop or something, we'll check back. >> we'll squeeze every last whisker out of that poor old voice of eamon's. back to simon hobbes. goes a market flash on a new drug. >> for those with irregularity haeshl heartbeats or shareholders in bristol myers squibb. it's an oral tablet to reduce the risk of stroke due to dangerous blood clots. it's the third time lucky for bristol-myers squibb, already approval in canada and the
european union and now it will give it blockbuster status. a rival drug to prodaxa. they will have to prove to doctors they need to come off another drug and in the clinical trial of 18,000 they found it did do a much better job. >> simon, thanks. >> it could be fiscal cliff-proof, the big trade you cannot avoid coming up next. >> and a montana rancher makes his voice heard on estate taxes. if we go over the cliff, he said it could put farms out of business. >> and the governor of montana will weigh in on that himself. more on that when we come back. stay tuned. [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market.
we did, bob. we did. got it. . another day, another step closer to the edge. talking about the fiscal cliff, of course. how are traders protecting themselves from the worst? let's find out from brian stoutman, an expert in hedging your portfolio against volatility. brian, good to have you with us. how are traders like yourself looking to protect themselves? >> well, certainly midday we saw options traders in the pit buying protection against their portfolio or shorting the market by buying some puts. what they did is went into the spiders, and we saw a purchase of about 5,000 puts of the 141 strength for 2.35. these options expire in two weeks so they are weekly type options and saw a lot of activity. the vix spiked extremely hard into the close.
some of our models indicating we could see a little bit of a selloff here in the markets as volatility rises so what we do as traders is we try to protect ourselves. try to buy puts and insurance on the portfolios or outright owning futures or some of the etns and likes, but certainly we have a lot of barrackitivity going on. our model said risk off in the market about two weeks ago, and we've been trying to protect some of our clients as the vix has spiked. now insurance is getting a little more expensive because that's what the vix indicates. certainly this selloff is not unusual, given the circumstances out of washington here. we could see a nice little washout in the market as we break below the 1390 level in the s&p, a level i've been watching, and be very wary. if we break below there i'm negative about this market. >> got it, but better to be safe than sorry, brian. >> thank you very much. >> for more options inside and more on how to protect yourself from the cliff, be sure to stay tuned for "options action" straight ahead actually at the top of this hour. >> if i may for a moment, the dow jones wires are now quoting
democratic leader nancy pelosi from the house saying she called the meeting constructive and candid at the white house. this meeting has broken up, as you know, and they came out and didn't talk to reporters at all, but somewhere a dow jones reporter got ahold of nancy pelosi, an she's telling them the president wants to see a plan from senate leaders, so that would confirm what we were speculating on earlier, the reason the house leaders left and the senate leaders remained behind was because apparently as we've been hearing from speaker boehner, he feels the ball is in the senate's court right now, and so that is what nancy pelosi seems to be confirming, that the president would like to see a plan coming from senate leaders mcconnell and harry reid. so the meeting has broken up. the stock market has tanked with no resolution at this point, and we move on. we want to put a face on one of the key issues facing us as we head towards the cliff, that is the estate tax, a group of americans trying to save the
farm literally. if we go over the cliff, estate taxes on farmers and ranches would jump from 35% to 55%, and on top of that more estates would get hit because the thresholds of the tax would fall from just over $5 million to $1 million. what makes it worse for farmers and ranchers is all the outsiders coming in and buying up land. we've been hearing about this run on farmland around the country. >> right. >> so prices are going up, so they go above that threshold, and that means the estate tax has a bigger bite going forward. >> absolutely. that's got our next guest angry, and the he's even making moves of his own to protect his ranch. joining us from helena, montana, bob hanson, president of the montana horse company and the montana bureau farm federation. good to have you with us today, sir. what are you doing to protect yourself in this situation? >> well, this year i'm transferring the majority of my ranch, as long as we're under the tax laws that we have in the
next few days, majority of my ranch will go to my sons, and i'm basically semi-retired, shall we say. >> what -- what is happening, bob, is more and more family-owned ranches, the family is having to sell the farm or the ranch because they can't afford the taxes, and the value of those farms and ranches has gone up over the time because of the tremendous interest in farmland these days, right? >> well, most of it in our area has been bought up by outside money for recreation purposes. we live in a very scenic area. it's not all that conducive sometimes to agriculture because we only get about 14 inches of rain, but we have beautiful trout streams and wildlife, and there's been a lot of influx of people with deep pockets buying ranches in montana, and the average price in our area has gone for over 2,000 an acre which cows can't pay for so
trying to keep it in the family -- >> so an unintended consequence of raising the tax and lowering the threshold is exactly that though. it's making it more difficult to pass a farm or a ranch from one generation to the next, isn't talked to senator baucus about this at all, your representative in the senate? >> yes, and senator baucus has been very helpful. he's been one of the leaders in the senate trying to help us with the estate tax. the biggest problem with the established old ranches, we have lots of land but no cash, and in order to raise it we have to sell off a chunk of the ranch to pay the taxes, and then with the capital gains going up on top of it, you pretty well wipe out everything you sell to pay the taxes. one at 55%, the other at 45%, you're pretty much taking everything that's there just to pay the inheritance tax on the
situation. and all these lands were bought and paid for. go ahead. >> finish your thought. >> it means that the old established ranches are going to go out of business. >> that's really tough. >> it's going to be outside money that will own it. >> what it will do to commodity prices, it's sad. anyway, thank you very much for sharing your thoughts on that, and you, the viewers, just what heard what a montana rancher thinks. coming up. >> we'll get the view from the statehouse, governor brian schweitzer, he weighs in on the higher estate taxes and we'll talk about the fiscal cliff overall. >> we're cnbc first in business worldwide. if we get any more details out of washington right now, we'll bring them to you. stick around. to the best vacation spot on earth. (all) the gulf! it doesn't matter which of our great states folks visit. mississippi, alabama, louisiana or florida, they're gonna love it. shaul, your alabama hospitality is incredible.
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still waiting for more developments out of washington. we're getting more indications of what may or may not have been discussed at the meeting at the white house. we'll get you those developments shortly. in the meantime, we'll look at the impact the fiscal cliff has on individual states. montana unlike many, may be facing a double whammy. not only are rising taxes a
threat on households, but federal aid for things like acculture could compound the problems if we go over the cliff. >> indeed, joining us to spell out the details is montana governor schweitzer. great to have you with us. we heard from a farmer in your state. he laid out the wation and it didn't sound good at all. what do you see as the impact on your state from that? >> don't tax me. tax the guy behind the tree. that's what we're faced with. everybody wants to pay lower taxes and get more services if you're in defense, you say, we need the money. if you're in agriculture, you see we need subsidized crop insurance. where does it end? in montana, we've had eight years of -- they're not willing to do that in washington, d.c. they just kick the can down the road.
>> what does it mean in terms of federal aid or reduction in federal aid if we go over the fiscal cliff and even if we don't go over the cliff, and they come up with a bandaid, you risk losing more federal aid down the road, don't you? >> no question about you. we're a rural state. montana is the size of pefl r. -- pennsylvania, new york. there are federal dollars that pay for maintaining those highways. you can't have a million people pay for all those highways because it connects the entire country. you have forest service, 30% of the land is owned by the federal government. so there's a lot of federal dollars that come to montana. that's part of the system. >> what would be the economic impact, going back to what the farmer was telling us about the situation, if estate taxes go up 55%. we're going to see farmers cutting back on the size of their farms, some may even go
out of business. what's the economic impact and how can you mitigate that, governor? >> the difficulty here is over the long-term. naturally, sometime during january if we go over the cliff which is more of a hill, these congressmen will come to their senses. they've gone completely crazy and apparently if you vote for something on december tlonl, then it's okay with grover nor quist and if it's after december 31st, it's something else. look, a pledge is one thing, but look right now we've been spending money on a credit card nationally for the last ten years without paying for it. both parties have been doing it. it's time to pay down. spend less and we have to raise more money. >> that's the thing. >> two great people, one democrat, one republican, we need to go back to those plans. >> to the spirit of the question, you muft have a contingency plan of some kind to make up for the loss of frlg
dollars, does that mean laying off state workers, does it mean raising taxes? what are you going to have to do if we go over the cliff? >> hold on to your hat there cowboy and koug. montana has the largest budget surplus in the history of the state. 49 states will go broke before we do. >> you know we've been talking about milk going up to about eight bucks a gallon. it will affect dairy produce as well. how does that impact your state? and do you see any resolution on that bill? >> the point is with the farm bill, we now have the highest commodity prices in the history of agriculture and farmers are still lining up and saying we need subs diz for our insurance
program subsidies for water and wildlife programs. i'm a farmer too. we're no different than people in defense and deation, and the hospital industrial complex. everybody wants to pay less and get more. we have to get real in this country. we need to challenge expenses and make sure we're paying as we go. >> governor, always good to see you, sir. thank you for joining us. >> the fiscal cliff is at our doorstep, the fate of our nation is in washington's hands. >> some final thoughts how to manage your money in these dicey times. i can't wait to hear what's going to be said as well, coming up. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first.
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